Centrum Housing Finance Ltd Sunday said a fund managed by Morgan Stanley Private Equity Asia has agreed to invest ₹190 crore to acquire a significant minority stake in the affordable housing finance company.
The investment is the first such external institutional funding in the Mumbai-based lender promoted by Centrum Capital Ltd. The proceeds, the company informed the exchanges, will be used to expand its operations and enter new geographies.
“The fact that we have been able to attract investment from a fund of the calibre of Morgan Stanley Private Equity Asia at this early growth stage of the company, is a testament to the strength of the company’s business model and a source of great pride for all of us,” said Sanjay Shukla, managing director and chief executive of Centrum Housing.
“This investment will further help us take the company to the next level as we increase penetration across chosen geographies without compromising on credit quality,” he added.
EY acted as the exclusive investment banking adviser to the transaction.
Started in 2017, Centrum Housing is a retail-focused housing finance firm with 36 branches across Gujarat, Madhya Pradesh, Rajasthan, Maharashtra, Chhattisgarh and Delhi, and over 3,500 customers. So far, it has disbursed loans worth ₹500 crore, focusing on the affordable housing segment. It offers various other loan products, including self-construction loans, top-up loans and loans against residential property.
The company’s 2018-19 annual report said it had a revenue of ₹39.32 crore during the fiscal year, while its profit stood at ₹1.43 crore.
“The affordable housing space in India is underpenetrated and offers tremendous opportunity for growth. We believe that CHFL (Centrum Housing) is well-placed in this segment given its strong retail focus, robust underwriting and collection mechanism, and disciplined ALM (asset-liability management). This will be the fourth investment in India’s retail lending space by funds sponsored by Morgan Stanley Private Equity Asia,” said Arjun Saigal, co-head of Morgan Stanley Private Equity Asia in India.
The housing finance market, according to an Icra Ltd report, is expected to reach ₹34 trillion in fiscal year 2022, pushing the mortgage penetration in the country to nearly 14%.
Further, the rating agency expected the housing finance firms to grow at nearly 14-16% in FY20, provided the liquidity conditions eased off, while affordable housing finance, it said, would grow faster than the overall industry.
Morgan Stanley’s Asia PE funds are focused on highly structured minority investments and control buyouts in growth-oriented companies, with significant business operations in the Asia-Pacific region. While most of its investments are concentrated in China and South Korea, in India it mainly invests in sectors such as consumer products, industrial products, financial services, healthcare and telecom and technology, according to its website.
The PE firm’s other bets in the Indian financial services sector include Janalakshmi Financial Services that raised ₹1,030 crore in September 2017, before its transformation into Jana Small Finance Bank Ltd.
In June 2016, a fund managed by Morgan Stanley PE Asia invested ₹114 crore in Chennai-based Five Star Business Finance Ltd, a non-banking financial company that lends mainly to small business owners.
